Clause 43.—(CO-OPERATIVE HOUSING ASSOCIATIONS.) (Hansard, 26 June 1963)

§ The Solicitor-General
I beg to move, in page 46, line 40, to leave out "paragraph 1 or 5" and to insert "paragraphs 2 to 4."
This Amendment speaks for itself. It is the new numbering of paragraphs 2 to 4 of the Fourth Schedule, on which I shall shortly have an opportunity of addressing the House. The Amendment is consequential.

§ Mr. Barber
I beg to move, in page 49, line 29, at the end to insert: Provided that this section shall not apply if the rent is not less than might reasonably be expected to have been obtained at the time when the tenancy was granted, having regard to the terms of the tenancy, and, if at any subsequent time the landlord had the power (whether by terminating the tenancy or otherwise) to obtain a higher rent, the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time. This Amendment might be conveniently taken with the Amendment in page 50, line 13, at end insert: (7) In this section "terms of the tenancy" docs not include any obligation imposed on the occupier or his wife in connection with his or her office or employment. These were put down to meet points raised in discussion between the Inland Revenue and the Institute of Chartered Accountants of Scotland. We are grateful to the Institute for pointing out that there was a matter here to be put right.
The Clause imposes a Schedule E charge on a person holding an office or employment if he occupies premises in the United Kingdom under tenancy from his employer and if they are rent free or at a rent which is below the annual value of the premises. The Schedule E liability is based on the annual value of the premises less any rent which he pays for it. The point which the Scottish accountants made is that the Clause may be unfair if the premises are let originally on commercial arm's length lease, but the value of the premises has gone up since the lease was originally granted so that the rent is now below the current value.
This point seems particularly strong where the lease was entered into when 1551 the tenant was not in or even contemplating entering the employment of the employer but subsequently enters into such employment. I imagine that this sort of case is not likely to be common, but obviously if it arises it would not be right to impose Schedule E liability on an ordinary employee who is merely occupying by virtue of a bona fide commercial lease at a rent which cannot be increased, even though the value of the premises has gone up. This principle holds good also if the lease was entered into when the tenant was in the employment of the employer. In such a case the benefit the tenant is getting is exactly what he would have got as an ordinary tenant. It has no element of remuneration from the employment in it. These Amendments meet the points, and again I express gratitude to the Scottish accountants.

§ Mr. Callaghan
I am deeply grateful to the Financial Secretary for that explanation. Even at the risk of keeping the House from Schedule 4 and the pleasure of listening to the Solicitor-General, I should like to draw attention to the wording. I read it six times and did not understand it. We heard what the Financial Secretary said and a glimmering of light broke through. I think that I understood what he said. If I did not, it is the fault of the imperfection of my understanding and not of the clarity of his explanation. I ask the House to read this and see what it makes of it: Provided that this section shall not apply"— I am all right as far as that— if the rent is not less than might reasonably be expected to have been obtained at the time when the tenancy was granted, having regard to the terms of the tenancy, and, if at any subsequent time the landlord had the power (whether by terminating the tenancy or otherwise) to obtain a higher rent, the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time. What on earth does it mean?
I hope it means what the hon. Gentleman said. I doubt whether the combined resources of the Attorney-General and the Solicitor-General would pledge themselves on a Clause drafted as obscurely as this. Let us read the words again and allow them to drop on our senses: 1552 …the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time. This is gibberish. I protest at drafting of this sort. The difficulty is that draftsmen today do not like full stops and it is astonishing how the quality of drafting varies a great deal. I read 20 lines of an earlier Clause which were without a full stop. It is important that even people like me should understand these things and it would be a good idea if now and again we dropped a full stop into some of these subsections. Let us use a few more verbs. Let us relate what we are saying to a single thought and then go on to a new sentence. It may take a few more words but it is worth it. I repeat that I do not understand what the last two lines of the Amendment mean. I trust the Financial Secretary, who has an honest face. I am willing to believe that they mean what he says they mean, but I cannot with the best will in the world say that I know they mean that.

§ Mr. Dalyell
In my first 12 months in the House I was too hesitant to complain about this sort of thing. In some ways it would have been slightly impertinent to do so. But at the beginning of my thirteenth month I should like to echo the protest made by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). This is abracadabra legislation, and the sooner we get rid of it the better.

§ Mr. Mitchison
I want to ask one question. I see that it was the Scottish accountants who called the Treasury's attention to this matter, and I have been looking through the Finance Bill to find out what happens to feus. I wonder if we could be told. These are leases. Are feus leases? They should not be, and, if not, what is the explanation, and did the Scottish accountants says anything about feus?

§ Mr. Anthony Kershaw (Stroud)
It seems to me that it is crystal clear. What are the Opposition worrying about?

§ Mr. Barber
Until the hon. and learned Member for Kettering (Mr. Mitchison) spoke I thought that he had not spoken because it was clear to him. But if he wants to know about feu duty 1553 he will find it in Clause 15 (1, b) which makes provision for the taxation of feu duties.

§ Mr. Mitchison
We are not talking about the taxation of feu duties. We are talking about something quite different. How do feu duties come into this context?

§ Mr. Barber
As far as I know, we are talking now about Clause 46, and unless the reference to feu duties in Clause 15 is somehow imported into Clause 46 I should not have thought that it would be relevant. I am afraid that without notice I should not like at this stage to give an answer off the cuff.

§ Mr. Mitchison
Before the hon. Gentleman sits down may I ask him whether that is quite clear? What we are talking about are conditions under which this Clause shall apply, and they are related to the rent that might have been obtained, and so on. I should like to know how we translate this into ordinary Scottish practice. I am sure that there is an answer somewhere. What is it?

§ Mr. Barber
If one looks at Clause 46, paragraph (a) and (b) of subsection (1), one sees that they refer to the case where an employee pays no rent for the premises, or the rent he pays for them is less than the annual value of the premises… If one refers to Clause 15, there it refers to rents under leases of land in the United Kingdom and there is a separate reference to rentcharges, ground annuals and feu duties. Here we are concerned with rent.